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How to Invest in Cryptocurrency?

How to Invest in Cryptocurrency

The investment scenario is evolving in modern times, as old economic theories are being questioned and new ones are forged. The archaic investment patterns and avenues are making way for more unique ways of making money. The concept of money is also being questioned nowadays, given the uncontrolled printing and inflation that has led to the failure of many economies in the world. Despite this widescale disruption, the basic tenets of investment are the same, as they are based on logic and prudence. There’s a reason why common sense never gets outdated.

Let us delve into the cryptic world and learn some tips and tricks of getting invested while also making some bucks on the go.

Investment Avenues for Cryptocurrency

Investing in cryptocurrency is similar to investing in any other asset, if not way more straightforward. The simplest way to invest in a cryptocurrency is by way of having an account on one of the top crypto exchanges. They have all the currency pairs you might be interested in, and the volume ensures high liquidity.

  1. Spot Market – This is one of the safest ways of investing in crypto. All you need to do is link your crypto account with your bank account and buy any currency at market price in this market.
  • You can also invest in a newly launched coin via ICO if you are so sure about it.
  1. Futures Trading – This market can also be accessed via crypto exchanges. You do not need to buy the token on the spot for trading in these markets. You can have exposure to trade perpetual contracts of the available cryptos with a margin availed from funds in your wallet in any form.
  • These markets are similar to commodity or stock futures where the speculation on the future price of the crypto.
  1. ETFs – Similar to most ETFs, which are based on index or basket of stocks, crypto ETFs, are based on tokens. It is an intelligent way to diversify holdings and steer clear from the trouble of selecting individual tokens through reliance on experts. Investing in ETF is cost-effective.
  2. Stocks of companies having cryptocurrency investment – If you do not want to get exposed to the crypto market directly but still have FOMO from the booming tales of tokens, you can instead invest in the stocks of companies who have a substantial investment in the crypto market. They are likely to have better research on the viability of those tokens, and the profit will eventually be translated to the shareholders in the form of dividends.
  • STOs are a way to tokenise the regulated securities to get the best of both worlds of blockchain and the stock market.

Which are Some of the Best Cryptocurrencies for Investment?

Many people use the terms coins and tokens interchangeably, which is common in the way slangs work. But there’s a difference between coins and tokens. The former is the cryptocurrency built on its own blockchain and is used for exchange, whereas the latter is a programmable asset that can be built on other blockchains such as BAT token, which is built on Ethereum’s blockchain and is used for monetising digital marketing.

Another term that is commonly used in the crypto world is altcoin. It was originally coined to refer to ‘alternative to Bitcoin’. Therefore, every coin other than Bitcoin is an altcoin.

Cryptocurrencies are of many types depending on the purpose they serve. Let us discuss the common ones here, with some examples.

  • Value Coins – These are the tokens that are used as a medium of exchange, similar to any fiat currency.
  • For example, Bitcoin (BTC) and Binance coin (BNB).
  • Utility Coins – These tokens provide some utility and are not mere units of exchange. These coins are used in making smart contracts, parachains, and even NFTs.
  • For example, ETH, DOT, XRP, ADA, SOL, etc.
  • Security Coins – These are also known as stablecoins. The purpose of these tokens is to be pegged against fiat currency and be an intermediary to the crypto world.
  • For example, Tether (USDT) is the first-ever stablecoin that is collateralised by USD that anchors its value.

Final Thoughts

The Crypto world is fascinating owing to its ever-changing and volatile nature. But it is also a cause of concern, as unlike fiat currencies that act as stores of value due to their tangible character, cryptocurrencies do not serve that purpose of money that well. They can one day be shooting to the sky and entirely lose vale the other day with some influential tweet. And there are meme coins that do not have any purpose at all. You need to put your money in the right basket to call it a mindful investment. You always need to remember that fundamental analysis of any investment is what fetches value in the long term. And also, foresight is crucial for a stable investment.